Dallas, TX · Member since 2011 · 308 posts · 59 votes
I met with a seller and we verbally agreed upon a price, but he said he might want to wait til next year to sell because of tax implications (he plans to retire next year). Neither of us are in any hurry to close.
My initial thought was to write up a contract with the closing date being sometime next year. Is this fine or is there a better alternative?
Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
13y
Yes, get the property under contract now, but set the transaction date (sale date) to be sometime in 2014. If absolutely essential, you could have early possession in the contact, but I would recommend against it. I would also consult you accountant and council to ensure the contract is worded such that the Tax man cannot deem the transaction to have occurred in 2013.
Dallas, TX · Member since 2011 · 308 posts · 59 votes
13y
@Roy N. Thanks. That was what I had in mind. I will double check that part. This is probably a dumb question, but what if we close this year and set it up as seller financing with the first and only payment being due in January?
Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
13y
Bryce:
If you close this year, the transaction will be deemed to have taken place now, regardless of payment schedule. You really need to work with your accountant and council to ensure you meet all the necessary conditions for the transaction to actually occur in 2014. Creating a contract with a future execution date is not uncommon, so this should be a fairly easy matter to make happen.
I had a very expensive lesson to this end, last year when buying out my partner ... Council was a little sloppy in their wording and the entire transaction was deemed to have taken place in 2012 and not half in 2012 and the other half in 2013.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
13y
If you close this year, even with no payment, his recapture will be triggered, at the least. Just do the closing next year, with a contract now. Have him get his own tax advice, which it seems like he has.